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RBS Chief Gives Up £4m Shares In Libor Exit

(c) Sky News 2013

The head of RBS (LSE: RBS.L - news) 's investment bank will forfeit millions of pounds in past share awards following political pressure for a prominent scalp from the group's involvement in the global Libor-rigging scandal.

I have learnt that John Hourican, who was brought in to rescue the business after the bank was bailed out by British taxpayers in 2008, is to relinquish roughly £4m in share options awarded to him based on past performance.

He will receive a year's salary in lieu of notice, worth around £700,000.

The details of his exit, including the cancellation of his share options, are expected to be announced on Wednesday by RBS.

Mr Hourican will leave the bank at the end of the month, having overseen a massive winding-down of RBS's investment banking operation during the last four-and-a-half years.

His role is effectively being made redundant by a restructuring of the division, and he is leaving despite the fact that both regulators and the bank's board acknowledge that he had no knowledge of, or involvement in, Libor-rigging misdemeanours.

Mr Hourican was asked by the bank's board to forfeit the £4m he is owed in shares in the last few days, according to insiders, and accepted because he is said to have felt it would be in the best interests of RBS.

In addition, he will not receive any form of bonus or share award for 2012.

The bank, which is 82% owned by UK taxpayers, will on Wednesday agree to pay approximately £400m in fines to UK and US regulators.

The majority of the settlement will cross the Atlantic and will be recouped from past RBS bonus pools, as well as payouts for 2012, following a demand from Chancellor George Osborne.

Around £100m of this will be clawed back from hundreds of senior managers across the RBS markets business, as Sky News revealed last week.

RBS is expected to spell out the details of the clawback arrangements on Wednesday.

Regulatory sources said that the Financial Services Authority (FSA) had told RBS that Mr Hourican retains its confidence and will not be prohibited from taking a future role in the banking industry.

Mr Osborne's intervention underlines the acute political sensitivity surrounding such huge fines being paid by a bank majority-owned by taxpayers.

Speaking on Monday, Mr Osborne hinted that the job of Stephen Hester, RBS chief executive, was safe but added: "It is right that those who are responsible - not just those who are directly responsible, but also those who were doing the supervising - must also bear a level of responsibility."

Last week, Sky News revealed the looming row between RBS and the Treasury over Mr Hourican's share awards.

Mr Hourican is understood to have stepped in to protect the role of Peter Nielsen, who heads the markets business and whose job is now thought to be safe.

"He has shown real leadership over this," one ally of Mr Hourican said.

The discussions between RBS and the authorities had not been completed on Tuesday night, but people close to the talks said that the final settlement is likely to include fines totalling roughly £400m.

Between £85m and £90m of the total will go to the FSA, with the remaining sum split between the US Department of Justice and the Commodity Futures Trading Commission.

The settlement will make RBS the third bank to acknowledge that employees committed abuses of the Libor-setting regime, either for personal gain or to project a false impression of their bank's health.

Barclays (LSE: BARC.L - news) was fined more than £290m, with UBS (Xetra: UB0BL6 - news) , the Swiss bank, hit by penalties of $1.5bn (£958m).

Emails and instant messages sent by RBS traders will also be released by regulators depicting the brazen way in which they attempted to manipulate the crucial inter-bank borrowing rates.

One of the outstanding issues on Tuesday night was whether RBS would be able to avoid criminal charges as part of the settlement, for which the DoJ has been pressing.

Settlements with other banks will follow in the coming months.

RBS and the FSA declined to comment. Mr Hourican could not be reached.

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